Correlation Between COMMERCIAL BANK and Sigiriya Village

Can any of the company-specific risk be diversified away by investing in both COMMERCIAL BANK and Sigiriya Village at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining COMMERCIAL BANK and Sigiriya Village into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between COMMERCIAL BANK OF and Sigiriya Village Hotels, you can compare the effects of market volatilities on COMMERCIAL BANK and Sigiriya Village and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in COMMERCIAL BANK with a short position of Sigiriya Village. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMMERCIAL BANK and Sigiriya Village.

Diversification Opportunities for COMMERCIAL BANK and Sigiriya Village

0.61

Correlation Coefficient

COMMERCIAL BANK  Sigiriya Village

Poor diversification

The 3 months correlation between COMMERCIAL and Sigiriya is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding COMMERCIAL BANK OF and Sigiriya Village Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sigiriya Village Hotels and COMMERCIAL BANK is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on COMMERCIAL BANK OF are associated (or correlated) with Sigiriya Village. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sigiriya Village Hotels has no effect on the direction of COMMERCIAL BANK i.e., COMMERCIAL BANK and Sigiriya Village go up and down completely randomly.

Pair Corralation between COMMERCIAL BANK and Sigiriya Village

Assuming the 90 days trading horizon COMMERCIAL BANK OF is expected to generate 0.47 times more return on investment than Sigiriya Village. However, COMMERCIAL BANK OF is 2.14 times less risky than Sigiriya Village. It trades about 0.1 of its potential returns per unit of risk. Sigiriya Village Hotels is currently generating about 0.02 per unit of risk. If you would invest  11,500  in COMMERCIAL BANK OF on December 28, 2024 and sell it today you would earn a total of  1,100  from holding COMMERCIAL BANK OF or generate 9.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

COMMERCIAL BANK OF  vs.  Sigiriya Village Hotels

COMMERCIAL BANK

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COMMERCIAL BANK OF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, COMMERCIAL BANK may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sigiriya Village Hotels

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sigiriya Village Hotels are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sigiriya Village is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with COMMERCIAL BANK and Sigiriya Village

The main advantage of trading using opposite COMMERCIAL BANK and Sigiriya Village positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMMERCIAL BANK position performs unexpectedly, Sigiriya Village can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sigiriya Village will offset losses from the drop in Sigiriya Village's long position.

The idea behind COMMERCIAL BANK OF and Sigiriya Village Hotels pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Volatility Analysis module to get historical volatility and risk analysis based on latest market data.